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ATLANTA SUPPLYSTUDYOFFICE
Cushman & Wakefield Research
CHRISTA DILALODirector of ResearchSoutheast [email protected]
RILEY MCMULLANAssociate DirectorAtlanta [email protected]
BRANDON LABORDSenior AnalystAtlanta [email protected]
LEAH HAYSAnalystAtlanta [email protected]
WHAT’S NEXT
AT THE CENTER OF
| 2 | ATLANTA OFFICE SUPPLY STUDY
ATLANTA SUPPLYSTUDYOFFICE
Cushman & Wakefield Research
CUSHMAN & WAKEFIELD RESEARCH | 3 |
CONTENTS5 Atlanta Office Market Intelligence
6 Construction
8 Subleases
10 Coworking
12 Large Block Availabilities
14 Outlook
Click table to jump to specific section
| 4 | ATLANTA OFFICE SUPPLY STUDY
Atlanta Office Market IntelligenceAdvanced Supply Analysis
While the outbreak of COVID-19 has introduced a level of uncertainty to the national economy and consequently the commercial real estate market, Atlanta is well-positioned to weather the storm as recent market performance has been robust.
At 18.3% in Q1 2020, the Atlanta overall vacancy rate was forecasted to remain relatively stable prior to the onset of COVID-19. Despite the delivery of multiple speculative projects and the anticipated vacancy of several second-generation spaces, the metro area’s supply has kept pace with discerning tenants’ demand for premium office space.
ATLANTA OVERALL VACANCY RATE
18.3%Q1 2020
CUSHMAN & WAKEFIELD RESEARCH | 5 |
ConstructionConstruction has been robust across Metro Atlanta in
recent years. Since 2017, 23 office buildings 100,000 sf
or greater have delivered, totaling nearly 6.7 msf of new
inventory—3.1 msf in the CBD and 3.6 msf in the suburbs.
With a current vacancy rate of only 10.1%, compared to
Metro Atlanta’s 18.3%, the appetite for first generation
space within new supply is apparent. Though the suburbs
housed more than half of the new inventory recently
delivered, space currently under development is now
concentrated heavily within the CBD. Eleven of the 14
construction projects presently underway are in Midtown
and Buckhead, accounting for 85% of the total, and
only three are being built in the suburbs, indicating an
increasing demand for urban office space.
Despite the high number of projects recently delivered and
under construction, Atlanta has an impressive recent track
record with highly amenitized buildings in attractive intown
locations outperforming the balance of the market. Within
Atlanta’s CBD market, the demand for premier space has
been strong. Three build-to-suit facilities were recently
constructed—the Anthem Technology Center and two
towers at the NCR Headquarters. Three additional build-to-
suits are currently underway for Norfolk Southern, Jones
Day, and a second building for Anthem. All four of these
tenants are leaving behind substantial blocks of second-
generation space across Metro Atlanta in favor of their
new sites. However, they are also bringing in thousands
of additional jobs from outside Atlanta—Midtown’s
attractiveness is drawing employment opportunities from
outside Georgia and keeping tenants in the market.
Since 2017, six now-completed construction projects
broke ground on a speculative basis in Buckhead and
Midtown. Upon construction delivery, this speculative
building set had an occupancy rate of 50.3%, though it
took an average of two-and-a-half quarters to stabilize
(when occupancy exceeded 90%). New CBD builds have
a total current occupancy rate of 91.3%, far higher than
the total CBD Class A inventory’s respectable rate of 83%,
demonstrating that in the face of a flood of new product,
the demand is there. One of the most impressive examples
of this is 725 Ponce, a 370,000-sf project which broke
ground on a purely speculative basis. Before construction
was complete, there were leases out on every space in the
building, and no vacancies remained within six months
of delivery. The premier space with direct access to the
BeltLine made it one of the most highly sought-after
locations in the metro area, serving as the city’s new high-
water mark for rental rates.
An additional eight speculative projects totaling nearly
2.8 msf are currently in development. These sites have
been 64% pre-leased and despite the short-term pause in
activity in the real estate market, the interest in premier
facilities remains strong. This was best demonstrated in
mid-May, when Microsoft announced plans to move into
nearly 525,000 sf, preleasing the speculative, two-building
Atlantic Yards project in full amid the pandemic. As is
often the case with under construction assets, leases are
being negotiated that are unannounced which will likely
accelerate preleasing numbers. While the extent of this
remains to be seen, this activity is likely to reinvigorate
leasing among other users during the COVID-19 slowdown,
and the high demand for properties like these can be
Since 2017, 23 office buildings 100,000 sf or greater have delivered, totaling nearly 6.7 msf of new inventory—3.1 msf in the CBD and 3.6 msf in the suburbs.
| 6 | ATLANTA OFFICE SUPPLY STUDY
expected to resume in Atlanta’s CBD.
SubleasesOther significant factors that could impact Atlanta’s supply and vacancy are subleases, coworking sites, and large block rollover. Further exploration into these areas offers a more comprehensive understanding of some potential influences on Atlanta’s supply.
Sublease space is a very small part of Atlanta’s story.
However, in past cycles it has been a precursor to
increased direct vacancy, which makes it worth
consideration as a leading indicator of what is to come
for the market. Sublease availability has registered steady
growth over the past year across Metro Atlanta, with nearly
450,000 sf of new sublease space hitting the market since
the start of 2019. Approaching 2.5 msf in total, sublease
space is currently at its highest point in this economic
cycle. Compared to a 17.2% vacancy rate for direct space,
however, Q1 sublease vacancy remained low at only 1.2%.
More significantly, the ratio of sublease to total vacancy is
on the rise, with sublet space now accounting for 6.5% of
the total vacant space in Metro Atlanta. In Q1, the sublease
share of total vacant space grew for the fourth consecutive
quarter, and Q2 is on track to see similar gains.
Nearly 60% of available blocks of sublease space are under
10,000 sf, though these account for only 22% of the total
sublet square footage. Meanwhile, five spaces are listed for
more than 50,000 sf, comprising 16.5% of the total vacant
Approaching 2.5 msf in total, sublease space is currently at its highest point in this economic cycle. Compared to a 17.2% vacancy rate for direct space, however, Q1 sublease vacancy remained low at only 1.2%.
| 8 | ATLANTA OFFICE SUPPLY STUDY
SubmarketSublease
Availability Count
Sublease Availability SF
QoQ (vs. 4Q 2019)
YoY (vs. 1Q 2019)
Sublet as % of Total Vacant Space
Buckhead 33 459,335 9.9%
Midtown 30 262,739 3.9%
Downtown 13 156,368 3.2%
CBD Subtotal 76 878,442 5.7%
Central Perimeter 55 920,454 12.6%
GA 400 Corridor 13 163,555 2.7%
Northwest Atlanta 24 289,259 4.1%
Airport/ S. Atlanta 2 7,967 1.8%
Northlake/Decatur 2 23,459 2.5%
Northeast Atlanta 22 205,259 6.3%
Suburban Subtotal 118 1,609,953 6.8%
Total Market 194 2,488,395 6.5%
sublease space. Many of the largest sublease availabilities
in Metro Atlanta presently do not have significant term
remaining and therefore are not a competitive threat to
direct vacancy. However, these blocks may consequently
contribute to a rise in direct vacancy upon lease expiration.
The majority of sublease availabilities fall outside the
CBD. While 1.6 msf is being marketed in the suburbs, just
878,000 sf is listed within the CBD—more than half of
which is concentrated within Buckhead. However, the rate
of recent sublet vacancy growth in Midtown has been
steeper than in Buckhead. In total, sublease space in the
CBD has risen 43% year-over-year. Central Perimeter alone
accounts for 37% of all sublease space on the market.
Across all of Metro Atlanta, one-third of the sublease
availabilities listed are not currently vacant but are being
marketed with a future availability date.
Since the COVID-19 outbreak, nearly 40 new sublease
listings have hit the market in Metro Atlanta including a
full-floor space in Buckhead and another in the Georgia
400 Corridor. Additional sublease space is expected across
the region in the upcoming weeks and months.
CUSHMAN & WAKEFIELD RESEARCH | 9 |
CoworkingCoworking space does not actively factor into vacancy
statistics and there is limited visibility into the vacancy
rate or percent leased within coworking firms’ operations,
but the potential shadow vacancy within coworking space
is an important factor for the office supply within select
submarkets.
Atlanta’s coworking inventory totals nearly 2.0 msf,
having grown by more than 68% since 2017. This space
is scattered across the Metro Atlanta area but is most
concentrated within Midtown. There, coworking accounts
for 5.1% of the Class A inventory. The largest user in the
metro area is Regus, which operates 703,449 sf under
this name and 296,629 sf as Spaces. Over two-thirds of
Regus locations are in the suburbs, while Spaces locations
are distributed more evenly across the total metro area.
Meanwhile, over 81% of WeWork’s 699,019 sf of space
across Metro Atlanta is located within the CBD market.
While Regus offices average 18,000 sf each, WeWork
locations are fewer in number but larger in size, averaging
63,500 sf per location.
The largest coworking spaces are each 80,000-sf locations
operated by WeWork—one Downtown at Centennial Tower
and the other in Buckhead at Tower Place 100. However,
a larger location is planned to open later this year in
Midtown. The Interlock, a 290,000-sf mixed-use property
in West Midtown, is currently under construction and is
anticipated to deliver in July. WeWork is slated to serve as
the anchor tenant, occupying 118,000-sf of space, though
the future of their relationship with the development is
now uncertain.
A large coworking project planned in West Midtown is
currently in a holding pattern. At T3 West Midtown, a
facility which was completed in 2019, Industrious and
building owner Hines planned a joint venture coworking
space for the full second floor totaling 35,500 sf. Progress
on this lease was placed on pause at the onset of the
COVID-19 outbreak and in mid-May, Hines began marketing
this space directly for traditional office users in response to
demand for another full floor at this location.
Atlanta’s coworking inventory totals nearly 2.0 msf, having grown by more than 68% since 2017.
| 10 | ATLANTA OFFICE SUPPLY STUDY
Large Block AvailabilitiesAtlanta’s Class A supply will be further impacted by the
rolling of large leases. In total, large users (50,000 sf
or greater) with impending lease expirations have the
potential to turn over more than 7.4 msf of office product
in the next two years. Nearly 5.6 msf of large leases are
expiring within Class A buildings in the CBD alone—a
potential turnover of 13% of the Class A inventory. This
space is by no means guaranteed new supply, but it does
serve to provide additional color to a study of the market.
Some tenants will likely renew in place, while others plan
to move into build-to-suit facilities, right-size, or possibly
leave the Atlanta market.
As AT&T moves forward with long-foreseen consolidation
plans, the telecommunications giant leaves several huge
footprints behind. In Midtown, the firm has already vacated
518,300 sf and is marketing an additional 768,300 sf as
available but not yet vacant. The campus is now being
explored as a major redevelopment site, with the Midtown
Alliance coining the prospective mixed-use project as
Tower Square. Meanwhile, AT&T is also shedding 955,000
sf of space at Lindbergh Center in Buckhead. The uptown
site offers potential users a transit-oriented, accessible
location and serves as the largest existing contiguous
opportunity in Metro Atlanta. The property is undergoing
a complete renovation as the landlord Rubenstein Partners
opts to upgrade the quality of the supply that AT&T is
leaving behind.
The flight to quality remains evident for many large
occupiers as an influx of new development allows tenants
premier, first-generation space in ideal locations. Several
sizable users have imminent plans to leave significant
blocks of existing inventory behind in favor of build-to-
suit sites or opportunities within speculative construction
projects: Norfolk Southern (379,300 sf), Invesco (227,600
sf), Jones Day (140,300 sf), and Smith Gambrell & Russell
(118,500 sf) will each vacate their existing Midtown spaces
upon construction completion of their new facilities.
With lease turnover comes an opportunity for landlords
to adjust to market rents. Many of the largest tenants
in Midtown have held their current leases for close to
10 years. Given the growth in Midtown over that time
period, the submarket’s Class A compounded annual rent
growth rate of 3.5% has outpaced these tenants’ average
annual escalations of 2.5%. As such, the rental rates these
tenants are paying are likely well below the current market,
offering opportunity to landlords even if these large users
renew in place.
Nearly 5.6 msf of large leases are expiring within Class A buildings in the CBD alone—a potential turnover of 13% of the Class A inventory.
| 12 | ATLANTA OFFICE SUPPLY STUDY
MIDTOWN UPCOMING LEASE ROLLOVER
AT&T Tower Square 768,900
Norfolk Southern 1200 Peachtree St NE 379,300
Invesco Two Peachtree Pointe 227,637
MailChimp Ponce City Market 207,000
Jones Day Pershing Park Plaza 140,342
Smith Gambrell & Russell Promenade 118,473
Regions Regions Plaza 111,000
Nelson, Mullins, Riley & Scarborough LLP 201 17th Street 103,156
Truist The Campanile Building 97,064
Federal Deposit Insurance Corporation 10 10th Street 94,306
Seyfarth Shaw 12th & Midtown 83,336
Truist 271 17th Street 78,756
Boston Consulting 12th & Midtown 59,997
Aecom One Midtown Plaza 57,720
Sage Software 271 17th Street 52,504
22 Squared The Proscenium 50,000
Purchasing Power Two Midtown Plaza 50,000
CUSHMAN & WAKEFIELD RESEARCH | 13 |
OutlookAtlanta’s performance related to new supply has been
impressive. Between 2017 and 2021, the Atlanta CBD will
have delivered more than 7.7 msf of new product in total
and will have grown its Class A inventory by 20.4%, with
high profile build-to-suit projects and heavily anchored
buildings dominating the construction pipeline. By
comparison, the market delivered 6.5 msf in the previous
10 years entirely on a speculative basis, growing the
building stock by 17.3%. More than half of the 2007-2016
deliveries fell in Buckhead and while the tenant base
ultimately became diverse, most projects completed
without anchor tenants in place. Meanwhile, Midtown is
delivering the bulk of new supply this cycle with positive
results, led by brand names like Microsoft, NCR, and
Google.
Atlanta has emerged as a high-growth Sunbelt market
with a strong urbanization trend. Premier tenants have
sought premier space, driven by the diverse economy,
comparatively low cost of living, and emergence as a key
technology hub. Atlanta’s economic growth is reflective of
the demand for new, high quality space, and the market
has been delivering accordingly.
Between 2017 and 2021, the Atlanta CBD will have delivered more than 7.7 msf of new product in total and will have grown its Class A inventory by 20.4%, with high profile build-to-suit projects and heavily anchored buildings dominating the construction pipeline.
| 14 | ATLANTA OFFICE SUPPLY STUDY
WHAT’S NEXT
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CHRISTA DILALODirector of ResearchSoutheast [email protected]
RILEY MCMULLANAssociate DirectorAtlanta [email protected]
BRANDON LABORDSenior AnalystAtlanta [email protected]
LEAH HAYSAnalystAtlanta [email protected]
CUSHMAN & WAKEFIELD RESEARCH | 15 |
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